Bad news for carb Holley guys.................. Holley, Specialty Car-Parts Maker, Files Bankruptcy (Update2) By Steven Church Feb. 11 (Bloomberg) -- Holley Performance Products Inc., a century-old maker of specialty parts for stock-car and drag- racing, filed for bankruptcy, faulting a late 1990s expansion for saddling the company with too much debt. Closely held Holley would be taken over by noteholders owed as much as $145.8 million, according to an outline of a reorganization plan filed today in U.S. Bankruptcy Court in Wilmington, Delaware. The company, based in Bowling Green, Kentucky, listed debts of $243 million and assets of $106 million as of Jan. 28. In the years following its expansion, ``Holley did not generate sufficient cash flows to support the debt incurred,'' Chief Financial Officer Thomas W. Tomlinson said in an affidavit. Holley and four of its affiliates filed for bankruptcy protection about two years after the company renegotiated the terms on part of the 12.5 percent notes that were due last year. Holley's majority shareholder, funds managed by Kohlberg & Co., quit providing the company the cash it needed to make interest payments, according to court papers. The reorganization will cut Holley's debt by about $100 million, Tomlinson said in a telephone interview today. Holley has about 390 employees in Kentucky, California and Mississippi who make carburetor and other fuel and air-systems parts with brand names including Hooker, FlowTech and Nitrous Oxide Systems. Nascar Sponsor ``Employees will not be affected by the bankruptcy, and the company will continue operations as normal,'' Tomlinson said. Holley's customers include Ford Racing and GM Performance Parts. The company is a sponsor of the National Hot Rod Association and has a program that supports the National Association for Stock Car Auto Racing, (Nascar), according to court documents. The company was founded in 1903 by brothers George and Earl Holley, who designed a carburetor for the Ford Model T called the Iron Pot. Later, Holley built engine parts for planes during World War II, according to the company's Web site. Under a deal negotiated with 70 percent of the company's second-lien noteholders, Holley would pay its general unsecured creditors, such as trade vendors, in full and give almost all its equity to the noteholders, according to a description of the reorganization plan, called a disclosure statement, filed today. Noteholders would get about 45.8 percent of what they're owed under the proposal, which requires a judge's approval. The case is: In re Holley Performance Products Inc., 08-10256, U.S. Bankruptcy Court, District of Delaware (Wilmington). To contact the reporters on this story: Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net ; Michael Bathon in Wilmington, Delaware, at mbathon@bloomberg.net . Last Updated: February 11, 2008 17:16 EST (Update2)
-------------------------------------------------------------------------------- Hey guys, my name is Shane Weckerly and I am the Director of Product Management at Holley. I know the bankruptcy word sounds bad, but Holley is fine. Please read the official press release below and then our further comments below that. BOWLING GREEN, KENTUCKY, February 11, 2008 - Holley Performance Products Inc. (the Company) announced today that its Owner/Investors have overwhelmingly approved a plan to dramatically enhance the Companys capital structure by converting a majority of the Companys debt into equity. Thomas W. Tomlinson, the Companys Chief Financial Officer, said today that This is a prudent financial move on the part of our Owner/Investors it tremendously strengthens our Companys financial position and provides substantial flexibility to invest in our future. This investment will allow the Company to realize its full growth potential and will maximize the value we can return to our investors. The actual conversion of debt into equity will be accomplished through a Prepackaged bankruptcy filing that will cancel-out the old capital structure and formally establish the new one. Customers, suppliers, and employees will not be affected. Mr. Tomlinson emphasized that, It will be business-as-usual at Holley throughout the restructuring process which we expect to be completed in as few as 45 days. James D. Wiggins, the Companys Chief Executive Officer, went on to say that We are very pleased with the transformation that has taken place here at Holley over the last several years. Today Holley is a lean and focused enterprise with strong customer relationships, significant technological capabilities, and diversified revenue sources. We have established a good track record of profitability and growth in enterprise value. This restructuring represents the culmination of tremendous effort on the part of the team at Holley and we are excited to share news of this successful program with you. Holley is a leader in the performance engine market, and is used throughout the world in racing, street, marine, and powersports. Holleys family of companies includes the leading brands in the performance market including: Holley, Weiand, Hooker, FlowTech, Earls, and NOS. So, what does this mean to you, the racer/enthusiast/consumer? It means that Holley will be a much healthier company and able to bring you better products, technology and support. This can now be done because we wont be under the same financial constraints of the last few years. Essentially, what has happened is that the original investment group will transfer ownership to the second tier of investors who were a minority owner. As a result, the debt we now owe is significantly less and puts us in a better position for the future. This was intentionally structured this way so our vendors, employees and consumers wouldnt be impaired in any way. It will be business as usual: Product will be available as always with no interruption in supply Race contingency and event sponsorship programs will continue as planned Technical service support via phone, e-mail and at track is unchanged All product warranty systems are continuing as normal New product development is ongoing and we expect to release several exciting new programs throughout the year and at SEMA/PRI. Holley has many enthusiasts that work for the company (including myself) that will continue to work hard to bring you good products into the future. Thanks for your support in the past and future. Shane -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
Shane, Is this "strengthening your financial position" by skipping out on paying vendors' bills? If not, what is the purpose of your declaration? I have seen many restructurings without bankruptcy. Just curious. -BC
Sorry, I should have mentioned that was a quote from him that I copied from another board. But I do agree with you Bob. Guy
Is this "strengthening your financial position" by skipping out on paying vendors' bills? If not, what is the purpose of your declaration? what little substance i could pick out from the corporatese fluff seems to indicate that a group of minority owners were the ones to whom the majority ( totality? ) of the liability was owed. not being capable of making their capital+interest payments, the majority owners seem to have gotten out from under this by vacating the premises and ceding shares to the minority owners.
45.8% payback to the $$$$ providers is as close to a true bankruptcy settlement as i've ever heard... ou:
I'd like to change my debt into equity..... start a business ( let's say, "Acme Corp" ) with a $100,000 loan from your bestesd bud. run it for 5 years, scraping and scrambling to make your loan payments ... and have something to live off of yourself. have an economic downturn put a real crimp in your style ( and possibly something silly like a balloon payment or an ARM ou: ). what does your bud do? he has to take over the business and push you out or find another purchaser. the business continues with the same inventory, physical location, sales people, middle management, customers and suppliers, production procedures, etc. to someone not trying to talk directly to the boss, they shouldn't even really notice that anything happened. you're out in the street either way though.
At least they're not hanging people (other than investors!) with bills...been on the bad end of that deal a few times here @ work...it's funny, everyone expects *other* folks to just eat their debt, but I doubt the lawyers miss a pay check...
Lawyers or the IRS. Bankrupcy doesn't relieve you of your debt for back taxes, interest and possibly penalties for an individual, imagine corporations are immune due to their structuring. They usually work out a payment plan, but that is based only upon paying off the interest, not working down the balance. That only happens if you pay more than the minimum payment. If you have multiple years, no matter what the amount, no monies go toward paying of any other year than the oldest one. Brother Rick went through this when he lost everything when forced out of the air force just before retirement. He'd been paying the minimum for over ten years and thought he was payin it off. Wrong. It was keeping up with the interest on the oldest one, 2 subsequent years were ammassing interest and had grown.
That "letter" from Shane is exactly like another one I just read from another "Product Manager." I don't know how much of it's true, but the fact that two supposed employees of Holley issued the same (word for word)release leads me question the veracity of any of this. This is some kind of spin put out by Holley to hang on to whatever customer base they still have left. I have a solution to the problem, quit making junk, and stand behind your products, then you won't need bankruptcy, or "Spin".
In other words they are going to sell (issue) more stocks, then pay off bonds. (bonds are "debt" and stocks are "equity") In a nutshell, bonds require fixed payments to bondholders but those payments are tax deductible. Stockholders payments (based on profitability) are not tax-deductible. It's a complicated thing, but that's the nutshell version. -BC
